The MYBA Covid Addendum

MYBA has drawn up a specific addendum to the standard charter agreement, known as the “Covid Addendum”, setting out in detail the effects that the Covid-19virus has on the performance of the contract and the relative outcomes

by Federico Santini*

THE JUNE 2020 ISSUE OF THIS MAGAZINE FOCUSED ON THE LEGAL CONSEQUENCES OF THE COVID-19 outbreak on charter contracts, trying to provide owners and charterers with a brief guide to the MYBA charter agreements – the most commonly used contract form – that could not be performed due to the Covid-19 pandemic. I outlined how, on one hand, clause (18) of the MYBA contract only allows for charter agreements concluded before the pandemic to be canceled, while on the other hand, the MYBA Charter Agreement surprisingly does not include a clause allowing the charterer to cancel the contract due to force majeure.

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The addendum distinguishes two possible situations: if the owner or the charterer is directly prevented from performing its material obligation because of Covid-19 before the beginning of the charter period; or if an outbreak of Covid-19 occurs aboard the yacht, during the charter.

I, therefore, concluded by noting the need in future charter contracts to add a special clause or addendum to regulate the case of cancellation by the owner or by the charterer for reasons directly related to the spread of the virus. This need has been immediately picked up by the MYBA brokers’ association which has drafted and started to use a special Addendum to the standard charter agreement, known as the “Covid Addendum”, which regulates in detail the effects of Covid on the performance of the charter agreement and the related consequences. Let’s now focus on the content of this addendum which contains clear and balanced ways to manage the emergency and rules of behavior designed to permit, if and when possible, the performance of the charter in safety and, if this is not possible, to establish the consequences of the cancellation.

Clause 2 of the addendum contains a paramount provision that expressly qualifies Covid-19 and its direct consequences (such as quarantine, travel bans, entry/exit restrictions from local or national authorities) as a cause of force majeure under clause 18a of the Charter Agreement.

The Covid Addendum distinguishes two possible situations: the first (clause 3) refers to the case in which the owner or the charterer is directly prevented from performing its material obligation (i.e. respectively to deliver and to take delivery of the yacht) before the beginning of the charter period because of the Covid-19 disease; the second (clause 4) concerns the case in which an outbreak of the Covid-19 occurs aboard the yacht, during the charter period. In the first situation clause 3 provides that the parties shall discuss in good faith for a period of a maximum of ten days or, if earlier, until the beginning of the charter period, possible ways to mitigate the effects of the force majeure event and to allow the performance of the charter, including but not limited to changing the port of delivery or return, changing the area of navigation, and/or postponing the charter period (within 12 months).

If the parties are unable to reach an agreement, the charterer or the owner shall be entitled to cancel the charter agreement; in this case, all payments made by the charterer shall be immediately repaid without interest, penalty, or deduction, with the sole exception of the costs of provisions or expenses made on behalf of the charterer.

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If the charter cannot be continued based on instructions, regulations, laws, recommendations, and good practices or is not considered safe for the life of the persons on board in the captain’s reasonable opinion, the charter agreement must end ahead of schedule.

In the second situation (Covid outbreak aboard), clause 4 requires the parties to search in good faith for a solution first of all to protect the life of the charterer, guests, and crew and, secondly and if possible, to allow the charter to continue, which may include taking protective measures onboard or deviating to a port to disembark any infected person. If it is not possible to continue the charter based on instructions, regulations, laws, recommendations, and good practices, or it is not considered safe for the life of the persons on board in the captain’s reasonable opinion, the charter agreement shall be terminated early.

In the case of early termination of the charter agreement, clause 5 of the Addendum provides that if the termination is due to the charterer and/or a guest being infected by Covid-19, or because the captain reasonably considers that there is a risk of the charterer and/or a guest being infected by Covid-19, the charter fee remains payable in full; while if the termination is due to a crew member being infected by Covid-19, or because the captain reasonably considers that there is a risk of a crew member being infected by Covid-19, the owner shall reimburse the charter fee to the charterer on a pro-rata basis according to the charterer’s use of the yacht. In either case of early termination, the broker shall retain the percentage of the commission corresponding to the pro-rata period of the charterer’s use of the yacht.

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Clause 2 of the addendum contains a paramount provision that expressly qualifies Covid-19 and its direct consequences as a cause of force majeure under clause 18a of the Charter Agreement.

The Covid Addendum further provides (clause 8) that the captain shall always be entitled (i) not to follow any instructions of the charterer when the captain reasonably considers that it may expose any person on board to the risk of infection or prevent the yacht from performing subsequent charter commitments, and (ii) to follow any instructions, regulations, laws, recommendations, good practices issued by any Governmental entity or the World Health Organisation aimed to protect the health of any person on board, even if this affects the performance of the charter agreement and/or the enjoyment of the yacht by the charterer.

(The MYBA Covid Addendum – Barchemagazine.com – April 2021)